No, Giving More Patents To Startups Won't Increase Innovation

from the not-this-again dept

This really isn't much of a surprise, given earlier statements from both President Obama and Commerce Secretary Locke concerning patents, but it's still a bit disappointing to see that one part of the latest administration plan to jumpstart more entrepreneurship is to make it easier for them to get patents. This is based on a falsehood: that entrepreneurs need patents to build businesses. This is a claim made up by patent attorneys that has little support in the reality of the trenches in places like Silicon Valley. While it does depend on the business you're in, good VCs rarely care about patents, since it's rarely the patents that matter. Entrepreneurship is all about the execution, and that's determined by the team, not some piece of paper. Instead, by making it easier to get patents, we just end up with more bad patents that make it harder for entrepreneurs to actually execute. What a shame.

Reader Comments

Making it easier to get patents can help with this as it gives some leverage and means more time *could* be spent on innovation.

Additionally, the long lead time on patents is a massive issue as you don't know whether you're protected for years. It creates a lot of risk when small businesses already have quite a lot. It also means that it is very difficult to license technology (that you've actually been working on and marketing) as the licensees want to see the patent. Similarly with a fair amount of VC funds.

However, it appears to treat the symptons of the problem, but doesn't fix the underlying issues with the patent system. The "easier patent process" would need to be tempered with making it less obscure yet better at killing off bad patents quickly.

Weak Patents- Strong Patents & TechDIRT Drivel

All patent teach something, and some patents are even simple enough that Mike Masnick can understand them.

So rather than "bad" patents we have low value, narrow patents at one extreme and high value patents at the other extreme.

No one defends low value patents because it is not cost effective to do so. In fact, few people spend much time thinking about low value patents.

Which brings us to high value patents. These are the patents which everyone, especially those whose sticky fingers are caught on. When a Patent Pirate is caught in the act they yell at the top of their voice that the patent is "bad" when in fact it is they who are BAD.

So when you hear someone talking about "bad" patents you need to translate on the fly that they are talking about valuable patents and their desire to steal.

So "bad" really = good = valuable = caught red handed = they know that they are going to need KY by the semi load.

And a troll is an inventor who has the gall to slam the cookie jar lip on an infringing party's sticky fingers.

Wonder if they missed a potential side-effect

I came across this patent report while reading the last TD article on the subject. It suggests that an increasing portion of US patents are granted to non-US applicants (50% up from 18% in 1963) so whether the patents are innovative or not it seems the US might not benefit quite as much as it thinks. That that seem to go againt the governments apparantly increasily protectionist stance of "US interests" so I wonder if they thought of that.

Re: Wonder if they missed a potential side-effect

Re: Re: Wonder if they missed a potential side-effect

You know the answer to this one.

Yeah but I live in hopes.

[sarc] Rare conversations of our time no 937a:
"Our patent system is a hopless mess and real inventiveness seems to be stalled or happening overseas."
"That's OK, the US government is on the case."
"Phew! Thank goodness then, I feel better already"[/sarc]

This is based on a falsehood: that entrepreneurs need patents to build businesses.

That statement is a falsehood in itself. While they don't "need" a patent to build a strong business, it would certainly help some of them to obtain financing or to move forward to market, secure that their idea cannot be replicated by others, flooding the market.

Getting a patent isn't as easy as you think. By comparison, it is easy to have the idea, it's easy maybe to build a prototype, and heck, it might be easy enough to produce. But obtaining a patent can be a difficult process. The idea isn't to give them patents for anything (which I know is what you are trying to imply) but rather to make the process a little less intense.

As time goes by, America's greatest strength is in it's new ideas and new products. If those can be stolen, mass produced in low wage countries, and sold back at a fraction of the market cost, there is little reason to think that Americans will consider engaging in this sort of business model. It's pretty easy to see how a lack of copyright protection can hurt actual innovation (not replication or minor variances on a theme).

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Don't know about you, but I always figured that if my idea was so damn easy to copy that anyone could flood the market with the exact same thing, I just give it away. Why charge for something that anyone can do? If I'm going to charge for something, it's going to be something that vary few people can do and I can do better. That's how it is in my current job; Few people can do it, I'm damn good at it, and I add extra value that others don't seem to want to.

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The costs are often on the development side, on the testing side, things like that. Some companies may have to spend a whole lot of money before a single widget is produced.

The replicators, once they have that widget in their hand, do a little bit of reverse engineering, and can reproduce it (often using cheaper materials to achieve the same end result). So while your manufacturing costs per widget may be similar, as a company you have a huge up front cost that has to be rolled into the cost of every widget you ship, and the competitor does not.

It's worse yet if your intention is to be "made in America", because now not only are your up front costs keeping you more expensive, but also making it in the US will up the cost again.

Service jobs, which are about your abilities, are not the same as producing a widget for sale. Your personal knowledge cannot be easily reproduced, but it also is extremely limited and unlikely to able to be patent anyway. :)

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"The replicators, once they have that widget in their hand, do a little bit of reverse engineering, and can reproduce it (often using cheaper materials to achieve the same end result)."

Really? Cool, I'm making myself an iPhone for for 50 bucks then.

After all, all it takes is a bit of reverse engineering. Now, if only I could open those damned pentaglobular-thingamajig screws they put on these things...

But now seriously, cloners don't stand a chance. If you are smart, by the time cloners arrive, you'll have a new product out that shadows the clone, sending the cloners on a new reverse-engineering cycle. And by the time they finish, you already have something new out...and so on.

THAT is how innovation works: Staying one step ahead of natural selection.

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To reverse engineer hardware can cost us much as developing something is not that easy.

What you doubt? go reverse engineer a microchip then.
Even software it can take years to reverse engineer.

To copy something you need to have knowledge too.

And like in the case of the Chinese they actually are not only copying things, they are making better copies than the original creator, just like the Japanese did before them and the U.S. did to Europe.

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The Chinese make better copies because they have all the original parts - they made them, because the US companies that came up with the processes and developed the products are having them built in China. To build it, you have to show them how it works.

The end result is that the Chinese have all the IP in their hands, in working models. Want 100,000 ipad screens? No problem, they build Apple 100,000, and then sell you the next 100,000 without a blink. Want the cases? The main boards? They make all of them, knocking off some extras isn't hard, even with some slight modifications (what Mike would call innovations) so they aren't exact replicas.

Add in your free Android OS, and you have the better Ipad, all made of the same parts as the Apple product, for about 1/3 the cost. The only issue: If Apple didn't make it to start with, you wouldn't be able to make the clone.

It is how the world works. It also sucks money out of the US economy at an incredible speed.

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Really?

Try to do that in Africa and see if they can produce anything.

Better yet go to South America and build a factory there and see if they can produce anything.

What really sucks money out of the U.S. economy is CEO's that hold the capability to stop other inside the U.S. from producing something, Americans could compete with the Chinese in equal foot if they could produce things, but by letting a few dictate who can do what you get in a position where the few ship the jobs away and try to hold on to imaginary power.

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"Americans could compete with the Chinese in equal foot if they could produce things, but by letting a few dictate who can do what you get in a position where the few ship the jobs away and try to hold on to imaginary power."

One of the projects I am contributing on is standards for modular automatted factories. With that US firms no longer have the incentive to out source to china and india. As labor costs go to almost zero, IP stays in the US, and the shipping costs are greatly reduced.

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Add in your free Android OS, and you have the better Ipad, all made of the same parts as the Apple product, for about 1/3 the cost. The only issue: If Apple didn't make it to start with, you wouldn't be able to make the clone.

Which in a non-patent bound world might encourage Apple to get up out of their proprietory bunker and offer a better Android-based tab of their own and blow the competition away instead of suing since it would seem to meet a customer demand. I might even buy one. I'd quite like to buy and use OSX for example but don't want a vastly overpriced PC clone to go with it.

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It is not that the have "all the IP in their hands."

What they do have are the detailed technical data packages and associated specifications needed to contstruct an article. Without these they would be left with resort to reverse engineering, a tedious process that in the case of complex goods is seldom able to be done successfully.

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The Chinese don't have just the original parts they have expertise to make those parts and Asia today have more capabilities than America has, that is why Apple subcontracted the engineer design of the iPhone to Samsung(or was LG I don't remember).

The fact is America is not producing anything others want to buy and it is loosing capabilities. Patents won't change that.

Want to see America being left behind?

In the U.S. someone printed a tooth scaffold and said that it would regenerate into a real tooth, but had not tested, in Japan the researcher made a tooth grow in a rat, basically in America people dream and in Asia they bring it to the real world. That is what you don't get it, if you can't make something for real and only hold the idea you are nothing.

About your assertion that nobody would have produced something similar here, search about the LG Prada they sold 1.8 million units of that phone since 2006 a full year before the iPhone.

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Recall that IP maximalists here have said repeatedly that the US's days in manufacturing are over. America's future now depends on a ferocious defense of IP, because IP is what the US is really good at (and the only thing it has left). Further, it has been implied that this is some kind of natural evolution of business.

By shipping much of our manufacturing to China, one might suspect that we have been enabling our own economic eclipse. First they make our products, then they copy them, then they improve them, then the make their own original products. This pattern has been repeated many times in the past with other smaller countries. Do IP maximalists really believe that more aggressive IP enforcement will stop the process with China, with India possibly not far behind?

Perhaps there are other venues where this argument might be better pursued, but I wonder how wise has it been for the US to move its manufacturing base elsewhere? Has it truly been inevitable, or is it just a case of corporate management selling out our future to enhance their own compensation packages (which are based on a short-term measurement of stock price during the narrow window of years when an individual CEO reigns over a given company).

One of the main problems I have with IP maximalists is that they think that the person who went through the legal exercise of recording an idea holds all the value while the actual producer of physical goods is an trivial contributor. In the long-run I believe that kind of thinking could well be disastrous.

Re: groupon and twitter

Groupon and Twitter have easily cloned business models and technology. In fact, as the hype for both built, one found many predicting their demise because of this concern. However. it has had very little effect on their abilities to grow as businesses. Instead, they had to/ have to keep their users happy, and iterate on their innovations.

So, not only are monopoly protections not needed, they could minimize the competitiveness of the marketplace.

Re:

As time goes by, America's greatest strength is in it's new ideas and new products.

There was a time that America truly competed with others they didn't had the tech and were able to surpass others despite being behind Europe decades in terms of technological advancement, heck every single story about the gold war I hear is about the U.S. playing catch up with the Russians.

What will happen with this patent insanity is that as time goes by it will become harder and harder to produce anything inside the U.S. this will make job creation impossible since you have to pay so much to produce anything and pay a thousand patent owners what they deserve(LoL, if you ask me they deserve nothing).

Maybe the plan of the American government is to create a field where nobody can produce or sell anything because is to expensive to do so.

Re:

That statement is a falsehood in itself. While they don't "need" a patent to build a strong business,

You agree with the statement while dissagreeing with it. Impressive.

If those can be stolen

Well you're in luck there - ideas can't be stolen only used.

mass produced in low wage countries, and sold back at a fraction of the market cost,

That's called competition. It's not like re-implementing someone else's idea makes the product magically appear nor does it make it competetive unless it adds "value" to the consumer over and above the "original". Plus it's not like there always is an original with which to compete as many patents just seem to be sat on deliberately until someone else does the work of bringing to market.

As time goes by, America's greatest strength is in it's new ideas and new products.

Out of luck with that one then. The data suggests innovation is increasingly happening elsewhere.

Re: patents take years

This I think is the part that Mike misses. There are 2 big issues with the patent system (1) bad patents and (2) it takes too damn long. He's all over (1), but forgets about (2) much of the time.

For a startup, the length of time is a real killer. A startup is a risky business that requires other people's capital to move products to market. This usually will require investors, VC, etc. Most of those people want to see that your idea is protected, or at least heavily factor that in to their decision of whether to give you money. It critical for accessing the risk.

If it takes you hours and hours (at a burdened rate of $100/hour of your engineers time plus the cost of a patent attorney at ~$300/hour) to get the application in then at least 3 years to get the award your in a tough position.

"Instead, by making it easier to get patents, we just end up with more bad patents that make it harder for entrepreneurs to actually execute."

The existence of patents does not change the difficulty of execution. The existence of patents does not stop people from making things. Any entrepreneur that is making decisions based on the fear of being sued is not going to succeed anyway. Techdirt is making stuff up here.

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What about the entrepreneur that makes the decisions, moves forward with the product, starts to succeed, and then gets slapped down by an overly broad patent? With as many times as Techdirt has brought up that exact situation, you'd think everyone would know that by now.

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Any entrepreneur that is making decisions based on the fear of being sued is not going to succeed anyway.

Spoken like someone that has never been involved with a startup in an industry riddled with patents. Speaking from experience, at one company I worked at we had to partner with an inferior vendor specifically because of their patent portfolio, as it was cost prohibitive to work with both the superior IC vendor and the IP holder.

Re:

The existence of patents does not stop people from making things. Any entrepreneur that is making decisions based on the fear of being sued is not going to succeed anyway.

The existence of bad patents does. A bad patent usually covers an obvious process or technology that is likely to be involved in many others due to it's obviousness or generality. If more bad patents are issued in this way the likelihood of being sued then increases as there is more chance of someone holding a patent in the area this would certaily give anyone pause. You also miss that it increases the likelihood of a startup having to pay multiple license fees to get off the ground, either because you are so ligitation happy you wouldn't consider another possible outcome or because you deliberately didn't mention it because it weakens your argumant further.

Take issue with the premise that more patents doesn't mean more bad patents if you will - it certainly doesn't have to in the vanishingly small chance of genuine reform - but stop with arguments based on ignoring parts of a sentence you don't like (in this case the word "bad").

Bad = Good & Valuable

Every patent property thief claims that whatever they are infringing is based on a "bad" patent and is "obvious".

If this was true then the patent is a weak patent and not a threat.

But the reality is that infringers call valuable patents "bad" all the time, yet wen the cases go to trial courts inevitably find that the patent is not bad and that it is valuable. That is why RIM had to buy 612 million tubes of KY. They infringed a valuable patent and all the propaganda in the world will never change this.

Re: Bad = Good & Valuable

Every patent property thief claims

Well since I dissagree with you that must be what I am, right? Sorry to dissapoint you, but I don't work in a sector where patents are a major factor and haven't had to have anything to do with them either way.

"bad" patent and is "obvious".

Having, as I said, nothing to do with patents and having glanced through a couple of the patents linked to on here I find that for example I look at a patent for (from memory) "A menu driven method for payment from a TV set-top box" or similar and find;
A/ I could likely have designed it myself - thinking through the steps needed to complete a transaction, turning it into a menu system and specifying the systems needed to support it to complete the transaction has a fairly limited number of distinctly different solutions, largely based on what other technology might be available to work with at the time.
B/ It looks not different in any obvious respect from every other menu system in many different situations and devices. So it seems either every one of them is a "patent thief" or they came to the same conclusion I did in A/
These observations lead me to conclude that the patent is or was likely "obvious" to anyone with the requesite expertise. I would call that a bad patent and as far as I can tell from commentary I've seen here so does the letter of the patent system and yet the patent exists. Calling it a "weak" patent is merely a semantic difference, though I have noticed that semantics are much beloved and argued about by lawyers
Extrapolating that conclusion it can be inferred that there are bad patents, though of course the number is open to question.

The reason I say "weak" vs. "bad" is a semantic difference is that, as you yourself have said, the courts are most likely to come down on the side of the patent holder. That gels with my (limited) observation that patent suits mostly seem to be:
A/ Won by the complainant
B/ Settled
C/ Dropped through threats of countersuing over other patents

You suggest that "weak" patents aren't a problem and yet logic suggests that win, lose or draw simply being accused of patent infringement costs a significant amount of money. I reaslise this is unlikely a problem for you as it is clearly what pays your wages but I would imagine it's not terribly welcome to a small business to be put in the position of having to pay through the nose to contest the "weak" patent.

As I said, how much this does or does not happen is unclear to me - my sampling is minimal and clearly likely to be skewed by the opinion-based source of the cases - but I it seems clear it does occur. I feel that many patents can be valuable and a patent process can have value as a tool to encourage innovation, however as a layman I find it the argument "All patents are good and anyone who dissagrees is a thief and a criminal" completely non-compelling and out of step with observable reality. I realise reality is not a significant factor in actual law, which is written by lawyers in a manner that can only be understood and manipulated by lawyers, but then I'm an idealist and live in constant hopes that some level of common sense might one day intrude.

For some great insight on why execution is more important than coming up with ideas, check out Spongebob's episode Krabs a la Mode.

In it Plankton keeps coming up with ideas to destroy Krab's business. However, Krab keeps executing those same ideas to make more money. The more ideas Plankton comes up with to destroy the Krusty Krab, the more money Mr. Krab makes.

It's exactly what you're talking about, Mike. Ideas are worthless in and of themselves. And even bad ideas can make money if you execute them correctly.

Patents

How Can Getting Patents Be Made Easier?

Innovation is based on making incremental improvements to products. However, patents today seem to be focused, not on the product itself, but on the "concept". Consequently, if concepts can be patented, an entrepreneur making a product enhancement would never get a patent. He would be sued for patent infringement.

I really do not see how reducing pendency by allocating more resources makes it easier to get a patent. The statutory requirements remain the same.

PS - Patents can be useful in many quite legitimate ways, but their need and benefits are oft overstated. I daresay that the large majority of patents ultimately prove to have been an unnecessary expense incurred by either the inventors or their assignees.

Re:

Eminent domain is already available for use against patents under the provisions of the Fifth Amendment. Of course, the "fly in the ointment" is the determination of reasonable and entire compensation.

Perhaps there are other venues where this argument might be better pursued, but I wonder how wise has it been for the US to move its manufacturing base elsewhere?

It's a point and IMO is actually worse than that because it hasn't stopped with manufacturing. Take IT for example; in the UK there is generally perceived to be a growing skills gap in 2nd/3rd line support, operations, system design and the like. The reason being that many if not most entry level positions are being shipped to places like india in outsourcing arrangements. As your non-outsourced "senior" positions move onward and upwards, how do you replace them if you don't have any talent below ready to move up because all the people with the experience live in India?

I suspect it's the same in the 'states if not more so and I would guess it's not confined to IT. As you say I think it's the focus on the short-term bottom line - "Have to make this year's figures look good so I can get my whacking great bonus"

More Masnick lies?

Being a VC and having represented VCs and startups for 20 years, I know patents are almost invariably a boon not an obstacle to startups. Masnick lies to the contrary are a constant theme on TechDirt. "If the theory doesn't fit the facts, change the facts." Albert Einstein
1. VCs want protection for the new ideas of start-ups and look to patents, trademarks, copyrights, domain name registrations, trade secrets, franchise rights, permits, licenses, and the like to find protection. If a startup has patents and/or the other items it is much more likely to get funded, Masnick foolishness to the contrary notwithstanding.
2. Start-ups are often not concerned so much with the patents of others, as they are not big enough when they start to draw fire. I know, I am also a patent litigator that often has to advise a patent owner that it simply is not worth a lawsuit against a startup when the expenses exceed the likely recovery, unless the startup seems likely to grow rapidly or is in an especially important area for the patent owner or where an example needs to be set at any cost. What start-ups hope, and usually find, is that they do not draw fire prior to discovering a workaround or until they start hurting the big guys, and by then the startup often has technology and patents of its own and has been in the field long enough to figure a workaround.
3. Patents of others spur innovation as start-ups try to come up with designarounds. Been there, done that. Often in attempting to design around, the start-up finds flaws in the patented item and develops an improved and better item in the process. That, contrary to misguided misinformation from Masnick, is progress of the useful arts and sciences promoted by granting exclusive rights for limited times to inventors. Read the Constitution and repent of you ill gotten ideas to the contrary.

Re: More Masnick lies?

Mike Masnick's anti patent mantra reminds me of Islamists. Could it be that Mike Masnick's point of view is driven by connections with the anti software patent crowd, a group of ignorant fundamentalists who want to blow up all patents, primarily because the vast majority lack the ability to invent?